Increased reporting suggests compliance programs taking firmer hold, but another year’s data needed to confirm uptrend, says Navex
Reports of misconduct to compliance and ethics programs nationwide increased for a fifth consecutive year, highlighted by a significant increase in retaliation claims against whistleblowers, according to findings of NAVEX Global’s 2015 Compliance Hotline Benchmark Report.
The increase in reporting is primarily seen as a good sign, indicating that corporate efforts to make employees aware of compliance program reporting mechanisms are taking hold. It likely also shows that employees are on the lookout for misconduct and are willing to report it. Since 2010, the report volume per 100 employees has increased 44 percent.
Carrie Penman, chief compliance officer and senior vice president of advisory services for Navex Global, says the five-year uptrend in reporting is likely due to the continued maturing of compliance and ethics programs, as well as successful efforts to improve awareness about whistleblower protections and awards. ‘Employees are becoming more aware of the type and kinds of things that should be reported,’ she says.
The study reveals that web-based reporting is increasing, but overall there is a good mix of reporting done by phone (32 percent) and web (23 percent). About 45 percent of the reports were filed by means other than phone or the web, a level that has remained consistent in recent years. Penman says the healthy percentage of ‘other’ responses represents ‘walk-ins and direct calls to the ethics and compliance officer. That means employees are willing to go in and talk about [problems].’
The Navex report also shows a significant rise in retaliation claims against whistleblowers and an unsettling increase in the amount of time it takes to close misconduct cases. This suggests there is still much that should be done to improve compliance programs.
While retaliation claims filed by whistleblowers increased in 2014, it’s the percentage of those claims that were substantiated that has drawn attention. Previously, very few cases of retaliation were substantiated, which prompted Navex to ask companies to take a careful look at how they were reviewing retaliation claims last year. The substantiation rate of whistleblower retaliation claims more than doubled from 12 percent in 2013 to 27 percent in 2014. Penman believes the encouragement to review claims more carefully, plus added external pressure from regulatory agencies, ‘has driven people to take a more serious and harder look at these kinds of cases.’ However, she also admits that because the percentage jump is so significant, ‘until we see what next year’s numbers are, it is just as possible that this was an anomaly.’
Substantiating legitimate retaliation claims is critical to the success of compliance and ethics programs; if employees don’t believe their claims of retaliation will be taken seriously, they are less likely to report internally. Statistics show that employees who report retaliation are reporting to entities outside their organizations. ‘Forty percent of the cases coming into EEOC involve some claim of retaliation, but what is coming into our internal lines is less than one percent,’ Penman says.
Another troubling trend from the report is the continuing increase in the amount of time it takes to close a case. Since 2010 the average case closure time has gone from 32 day to 39 days. Most compliance executives would like to see a decline in the time needed to complete internal investigations. Unfortunately, it will be hard to reduce case closure times because reporting volume continues to climb while firms aren’t allocating more resources to investigate claims. Research also suggests that companies must do a better job of prioritizing among the higher volume of cases so disputes that should take less time to resolve don’t sit for weeks.
Cases in the financial auditing and accounting category took the longest to close (57 days) while environmental, health and safety cases took the shortest time to close (33 days). Human Resources and workplace respect cases took 39 days to close, up from 36 days in 2013 – a finding Penman says should be of major concern. She says companies should be able to respond to these issues quickly and efficiently in order to keep company morale at a high level.
‘I think that’s a risky decision… to have human resources issues festering,’ she says.
To improve compliance and ethics reporting in the future, Penman says companies should focus on leadership and culture – creating an environment where employees feel comfortable to raise questions and report issues of concern. Organizations should also find additional ways to provide better training and support for managers who monitor compliance.
‘It is important to give tools, guidance and support to first and second level managers so that they know how to hear, receive and manage the issues that are brought to them,’ she says.
